Thursday, September 11, 2008

Patents explained for Start Ups

A couple of weeks back Jon and I visited an Intellectual Property Lawyer to discuss the steps required to take out some patents on our technology concepts. Apart from the token IP Law education they squeezed into my degree all those many years back, I have never ventured into this side of business before. So I found this process pretty enlightening. [1]

If you are seriously considering patenting, do find a patent attorney and have a chat (yes, specifically patent attorney as opposed to intellectual property lawyer). I say this both as a disclaimer (IANAL), but much more than that, it's simply a good idea. Patent and IP Lawyers are generally experienced, clever, well-connected people and can offer good advice and referrals on a lot of topics. [2]

The first consultation is usually free (in fact let the alarm bells ring if they try to charge you). Payment generally only starts when you decide to go ahead with the process. [3]

The first thing our lawyer asked was if we were ethically opposed to patents, especially software patents. Irrespective of the answer, the advice was still to consider applying – if for no other reason than to provide protection against aggressive competitors or "patent trolls"[4]. One could, I guess, argue that this is what any lawyer is going to tell you. Even so, anyone in the industry would probably be aware that it still makes a lot of sense. He then proceeded to walk us through the different stages of registering a patent, and the different options we had – including when and roughly how much money we would need to fork over.

The basic premise of a patent is that you are disclosing your invention to the state in exchange for exclusive rights. [5] To do this you need to demonstrate that you have innovated in your chosen field beyond what would be considered a normal logical step.

Simply having your patent submission accepted doesn’t necessarily mean that you have exclusive rights to your invention. It can still be rejected by the courts. This is due to two reasons:

Someone else may have lodged the same or similar invention before you. The patent approvers do not trawl through all of the existing patents to determine if you are the first, this is your responsibility – and that of your competitors. Google have recently implemented Google Patents, a searchable data store of all United States patents.

Ultimately the courts may find the patent unenforceable. Patents are actually written as a series of claims. The first couple are typically very broad sweeping claims that courts are unlikely to uphold; the claims then start to narrow in on the truly innovative parts of your patent becoming more and more specific. This is done in the hope that the higher claims will be upheld, whilst still providing fallback protection if they are not.

Whilst the term ‘international patent’ occasionally seems to pop up, in reality it is not possible to establish a ‘world wide’ patent. Patents are granted on a per territory basis. Not only that, the rules as to what can and can’t be patented, how the patent itself needs to be presented, and what exclusive rights you can derive from the patent differs from territory to territory.

Much of the fundamental basis of the patent system is similar in many territories. Clearly, the broad aims of patent law in the United States and European Union are very similar – However, even when the basis of the patent law is very similar, there can often be a lot of variance in the interpretation and bias of a particular system.

In the United States, for example, patent applicants can typically secure a patent by demonstrating that their application is inventive. By contrast in the European Union, there is a stronger focus on demonstrating the patent solves a real world problem. Australia has traditionally followed the US system, but is now tending to adopt the approaches of the EU. There are other differences too. In the EU the significant date in resolving conflicts is the date of submission, while in the US it is the date of invention.

Ultimately, if you need International Patent protection, and many Internet-centric technologies do, you have no choice but to individually apply for patents in each country that you wish to secure exclusive rights to your invention. Each country has a differing cost associated to them (It varies considerably, but circa several thousand dollars US.[6] )

Much of the expense is to have a patent attorney draw up the draft patent to specifically meet that country’s requirements, and to pay for an official to prosecute the patent. However, you might incur other costs too, such as requiring official translations of your documents.

There are some options though on how you go about this, and those options have differing time periods, and differing cost structures.

You can simply apply for individual patents in the specific countries you choose. This is the cheaper option if you only wish to secure patents in a few countries. Following this path you would typically look at with a 12 month period before the patent is prosecuted and your payments are due.

There is also an option to follow a path that uses the process defined in the Patent Cooperation Treaty. [7]This isn't an ‘international patent’, but a normalised processed for applying for patents in multiple countries. Amongst other things, it allows you to set up on priority date (date of filing) across all the participating countries. [8]

This PCT process is initially more expensive (circa US$5,000 - 10,000). However, the normalised process pushes out the need for individual country patent prosecution decisions and payments by a further 18 months.

So whilst there may be a larger up-front cost, you actually buy yourself some time. If you're a start-up, this can be invaluable. It allows you to obtain a level of IP protection across all PCT countries without going through the expensive process of prosecuting these patents. This time could be invaluable for securing Venture Capital.

However, there are also other benefits. The international patent reviewers will highlight all of the common problems patents hit for the differing countries. This means when the patents are sent to the individual countries to be prosecuted it is far less likely you will see rejections, hence potentially saving you money on resubmissions. The international patent reviewers can also advice that you are unlikely to be able to secure patents in certain territories, saving you the cost of these submissions. The other advantage is that it provides you another point in the process in which you can make modifications to your patent, which may help if the specific real world problem you are solving has slightly changed since your original submission.